Should managers, when taking investment decisions, follow the signals given by the stock market even when those do not coincide with their own assessment of fundamentals? Do they? In this paper, the authors review theoretical arguments and examine the empirical evidence. First, they look at the...

Product and labor market deregulation reduce and redistribute rents, leading economic players to adjust to this new distribution. It typically comes with distribution and dynamic effects. To study these effects, we build a macroeconomic model on two central assumptions: monopolistic competition...

This paper characterizes the dynamic effects of shocks in government spending and taxes on U. S. activity in the postwar period. It does so by using a mixed structural VAR/event study approach. Identification is achieved by using institutional information about the tax and transfer systems to...

Under central planning, many firms relied on a single supplier for critical inputs. Transition has led to decentralized bargaining between suppliers and buyers. Under incomplete contracts or asymmetric information, bargaining may inefficiently break down and, if chains of production link many...

This essay argues that the history of macroeconomics during the twentieth century can be divided into three epochs. Pre-1940: a period of exploration, during which all the right ingredients were developed. But also a period where confusion reigned, because of the lack of an integrated framework....

We investigate the determinants of regional development using a newly constructed database of 1,569 subnational regions from 110 countries covering 74% of the world's surface and 97% of its GDP. We combine the cross-regional analysis of geographic, institutional, cultural, and human capital...

When world trade is costly, a country can profitably industrialize only if its domestic markets are large enough. In such a country, for increasing returns technologies to break even, sales must be high enough to cover fixed setup costs. The authors suggest two conditions conducive to...

This paper presents two propositions about corruption. First, the structure of government institutions and of the political process are very important determinants of the level of corruption. In particular, weak governments that do not control their agencies experience very high corruption...

The authors present a model of bargaining between politicians and managers that explains many stylized facts about the behavior of state firms, their commercialization, and privatization. Subsidies to public enterprises and bribes from managers to politicians emerge naturally in the model. The...